The Government's efforts to lessen the impact of the looming recession do not mean the end of New Labour, Business Secretary Lord Mandelson said last night.

The minister told business leaders that the "unprecedented" actions taken to help banks and businesses cope with the economic downturn were being painted by some people as a departure from the principles New Labour brought to office when the party won the1997 general election.

He told the annual dinner of the Institute of Directors: "It wasn't. It is the times that have changed, not New Labour."

"It is absolutely right, at a time of financial crisis the like of which has not been seen for decades, that government throws its whole weight behind restoring the banking system to ensure the proper functioning of the economy," he said.

"We have intervened in the banking crisis not to crush markets but to rescue them, because we want markets to work better."

Lord Mandelson told business leaders that New Labour continued to recognise that the commitment to strong public services was matched by the obligation to reform and ensure value for money.

The measures in the Pre-Budget Report did not reverse that commitment, the minister claimed, but stressed the importance of maintaining investments in public services, especially during the current economic difficulties.

"Previous Labour and Conservative governments met economic crises by massive retrenchments in public spending and investment, which inflicted huge damage on the economy," he said.

"The need to continue to provide the constantly improving services that people expect will make it even more important to modernise the public sector and ensure the efficiency of service delivery. These New Labour fundamentals have not changed one iota."

But Miles Templeman, director-general of the Institute of Directors, said that the fiscal stimulus outlined by Labour was not the right one.

"We were an early supporter of a fiscal stimulus, but we don't think that the fiscal stimulus is the right one. And we are very concerned over time over the tax proposals.

"What we want for Christmas is a business secretary who is really going to be a voice of business in Government. We've had five secretaries of state in the four years I've been in charge and none has got really established. I hope, with his high profile, Lord Mandelson will be able to change this. We are in an economic war, no doubt about it."

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